Hi Mark,

Thanks for an insightful article on capital gain tax.

Happy Easter greetings to you...!

I am local resident PR turned citizen since 2017.

My query is on overseas property in India which I had purchased in 2014. local value around 400K. When I moved to Australia as PR IN 2017, the based value was around 430k. The current value is around 500k.

The property is on home loan with indian bank ( i pay both principal /interest on same).I have put it on rent and I declare same to local tax authority though don't claim any tax benefits as the rental is minimal compared to the interest amount.

Wold be great if you can clarify and provide your inputs on below queries

- If i sell the property in India at present market rate which is around 500k i will be paying local tax TDS per norms based on current index value ie and tax rate . 20 % tax on local capital gain. My anticipated gain will be around will be around 80k post tax deduction in India

- Given that there is treaty between Aus /india on avoidance of double taxation, will i be further taxed here in Australia on the actual gain of 80k (as the property was purchased before I became PR/Citizen).

- I have declared here with ATO on having a property overseas but haven't claimed any negative gearing on same. (as the property was purchased before I became PR/Citizen). If eligible for negative gearing, how many years i can go back on amendment at ATO and claim negative gearing retrospectively ( ie last 5 financial years i read somewhere though not clear)

Appreciate your inputs..

Thanks..!

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Hi Mark and thanks for your explanation.

I have 2 years in Australia under a 482 Short Term Skilled Visa; and I own a property overseas that would be sold soon, which I got it 6 years ago. Do I have to pay CGT for that asset since I am not a Permanent Resident yet?

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Hi Mark. Bought a unit in NZ and after some reno, rented it out. Purchase funded by a mortgage at Australian bank (NAB). Can you let me know where in the tax form I have to lodge the gross rent, and where I can deduct depreciation, rates, BodyCorp, maintenance etc. I didn't get your 10% witholding tax for interest deduction. Is that still applicable if the mortgage as well as interest payments are an Australian bank ?

Thanks in advance

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I read with interest your comments regarding owning a foreign property as a temporary resident.

I am working in Australia on a 482 Temporary Skills shortage Visa in Australia. I have a property in the UK which is netting a small income (under the UK tax threshold of 12,750 GBP) and I have been married to my Australian partner for 4 years.

The UK government does not tax me on this income (none of which is transferred to my Australian bank account), but the ATO will, because I am married to an Australian citizen. I find this hard to accept, but assume at this stage the advice is correct.

Is there any information available as a reference in my specific case you could point me towards?

Best Regards

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Hi Mark,

Does CGT also apply if one disposes of foreign property as a gift to someone else?

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Your foreign property may be depreciated according to Australian Div 40 and Div 43; however, you will need to determine whether the property was either constructed or renovated after 1985. If before, the property will not be eligible for depreciation.

A normal amendment period equals two (2) years following the date of assessment of the Notice of Assessment. If it relates to foreign income, the amendment period may be four (4) years, as per the Income Tax Assessment (1936 Act) Regulation 2015 (reg 14).

As for the tax treaty, India will have first right to tax property situated in India, but if you're a PR/Citizen in Australi and a tax resident, you will be assessed on worldwide income. Under the treaty (as well as Div 770 of ITAA 1997), you will be able to use a foreign tax credit to offset Australian tax liability.

The date you became PR and tax resident will be used to determine market value of the property, which can be used as the replacing cost base for the property upon sale. You may also consider whether other CGT concessions or exemptions apply, such as the 6-year absence rule on main residences, and of course the 50% CGT discount.

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If you're on a temporary visa and you do not have an Australian resident spouse under the Social Securities Act 1991, then you will most likely meet be eligible for the foreign income exemption rule, which exempts temporary residents (as per the Migration Act 1958) from ta assessment on disposal of foreign assets, as well as passive foreign income. If you intend to become PR in Australia, the property will become Taxable Australian Property (TAP) on that date, and it will come within the realm of the Australian tax system. You should have the market value of the property assessed on/around that time as it may constitute the replacing cost base (as opposed to actual acquisition cost) in the event of a (deemed) disposal.

Be aware that if you become PR in Australia, and you decide to depart Australia, a deemed disposal will take place (I1 CGT Event). It is possible to defer this until the actual disposal (A1 CGT Event); however, in most cases the tax liability on an I1 CGT event is lower due to lower tax rates (resident vs non-resident rates), eligibility for 50% Capital Gains Discount (not avail for non-residents), and of course the increasing market value of properties, which may result in a higher capital gain = higher tax liability.

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You will need to prepare a foreign rental schedule on the income tax return. If you have any questions in relation to the preparation of your income tax return, you should consider engaging a TPB registered tax agent to assist you. You should in particular look for a professional with experience in foreign property ownership.

As for the interest income, this is subject to the treaty withholding tax (WHT), which is usually 10%. This means that banks are required to withhold the WHT if you report to them you're a non-resident. If this occurs, the interest income is not reported in your income tax return as sufficient WHT is deemed to have been withheld. In the case where no WHT was withheld, the Commissioner of Taxation will apply the 10% WHT, and you will receive a Notice of Withholding Tax alongside your Notice of Assessment. This will constitute a tax payable.

If you're paying interest as part of your mortgage of your investment property, you can use this as a deduction against rental income. Please be advised that NZ has removed the availability of interest deductions against rental income, but Australia hasn't. The NZ deductions available are far more limited than Australia, but in Australia the record keeping requirement is far more onerous.

As per the tax treaty, as the property is situated in NZ, NZ will have first right to tax income derived from the property. Australia allows a foreign tax credit under the treaty, as well as Div 770 of ITAA 1997. It is unclear whether you're an Aus tax resident or not. If you're not an Aus tax resident, and the property is situated in NZ, then foreign income for a non-resident = exempt from tax.

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As you have an Australian partner who will be a resident under the Social Securities Act 1991, you're not exempt from foreign passive income and capital gains. You will be tax assessed on worldwide income instead. Whether your income is transferred to an Australian bank account or not is irrelevant.

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Hi there,

My parents own a house in the UK since the 1980s. There's no mortgage and it's rented out. They would like to sell it but are unsure about how to go about it and also the tax implications.

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Hi Mark, I am Australian citizen, recently sold a farm in India. The farm land was inherited. I also have some money sitting in my account their which was gifted. Please advise how can I bring the money here in AUS in most legitimate way. Will I be paying any tax on it? Thanks

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Hi there,

I'm currently on the 482 Visa and my company has submitted the application for the 186 Visa for my family a few months ago (still pending approval)

I'm originally from Malaysia but was previously based in the middle east - I purchased a property in Dubai in 2017 - The property was purchased from a developer off the plan and is still being built - the original target completion date was 2021 - however, this has been delayed due to COVID and is due to be completed in Q2 2023

If everything goes according to plan, I'm expecting my PR to be granted within the next couple of months - I have the following questions:

1) Once I become PR and I decide to sell my property in Dubai (say within Q2 203), will I be taxed by the ATO? - and how much will the property gain tax likely to be? (I should also mention that Dubai is a tax-free country)

2) As the property is still under construction, how will the ATO view this in terms of ownership? - i.e. have I owned the property since 2017 or only after completion?

3) Will the property gain tax be much less if I decide to sell the property after at least 12 months of ownership?

I would really appreciate your input

Cheers

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To avoid probate hassle in a far away land, our parents transferred ownership of their home to us 4 children. The condition was they could live until death.

So we were non-beneficial owners until then. What date should be used to determine initial cost for capital gains?

Easy / safe answer is transfer date, but it wasn't a true asset until it we could do something with it. Any ideas / suggestions?

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I will be Australian Citizen this year. My father wants to give an apartament overseas wich had a fire. I have to pay repairs to make it livable, and then pay to transfer the ownership. Then I will like to sell it and buy something in Australia. This burned place wich one day will be my home, it will be my only house, since in Australia I live in a shared house. Would I have a main residence exception for that ?

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*EDITOR'S NOTE*

The Money team is unable to give tax advice.

Please contact a registered tax agent for advice on your situation.

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HI Mark:

what if someone has a share of a residential property overseas and it is not earning any income coz it is used by someone's relatives as residential ever since ...is there a need to declare on your tax return? and any penalties for not delcaring coz it is not earning any income at all, it is only used for residential purposes ... a gift from his grandparents....b4...

Would certainly appreciate a reply

thanks

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